A stronger NAD to ease price pressures … as inflation remains stable

16/04/2018
by Kelvin Chiringa Business

As inflation remains stable at 2.5% year on year according to the latest data from the Namibia Statistics Agency (NSA), PSG Namibia anticipates a stronger Namibian currency from now onwards as coming in to help ease price pressures.

Yet the possibility of higher international oil prices due to a larger than expected increase in the global fuel demand remains a risk, Eloise Du Plessis cautioned last week.

“The Namibian dollar has appreciated significantly since December 2017, mostly thanks to market-favourite Cyril Ramaphosa’s election as president of South Africa, following Jacob Zuma’s resignation as head of state in February 2018,” she says.

But the strength and fate of the Namibian currency, pegged against the unstable Rand, is tied to the impact of what Ramaphosa will choose to do as far as improvement of South Africa’s fiscal balance is concerned.

In simpler terms, a fiscal balance is derived from the amount of money government has from tax revenue and the proceeds of assets sold, minus any government spending.

When the balance is negative, the government has a fiscal deficit, when the balance is positive, the government has a fiscal surplus.

But he will have to go above this and provide clarity regarding policy and clean up corruption, factors that investors consider before they can pump in money into any economy.

“Another risk to the currency that has emerged in the last couple of months is the possibility of a trade war due to rising global import tariffs that could reduce global growth and contribute to emerging market currency weakness,” Du Plessis further warns.

Current estimates for global growth are pegged at 3.9%.

The global trade war is being fueled by the United States president Donald Trump who according to Reuters, “Has directed U.S. trade officials to identify tariffs on $100 billion more Chinese imports, upping the ante in an already high-stakes trade confrontation between the world’s two largest economies.”

Media reports are that further tariffs were being considered “in light of China’s unfair retaliation” against earlier U.S. trade actions, which included a proposed $50 billion of tariffs on Chinese goods.

China has struck back, mooting levies on $50 billion of U.S. imports.

Central bank governor Iipumbu Shiimi told The Villager last week that he wishes the rhetoric around this trade fist-fight will not result in an out and out war which will pinch Namibia severely.

“As a small and open economy, anything that threatens international trade is not in our favour. We don’t believe that there has to be a trade war and we hope that measures will be taken. I am positive. We have been there before,” said the governor.